How is the Investment Score calculated?

Investing made easy and rewarding – that’s the philosophy behind the Investment Score on smallcase! At the heart of the Investment Score is the well-researched core-satellite investment approach. This strategy involves dividing your portfolio into stable, steady, and high-growth assets, ensuring a balanced and diversified portfolio. Guided by this approach a score ranging from 100 to 900 is calculated for your investments in Mutual Funds, Stocks/ETFs and smallcases.

However, unlocking a high Investment Score requires a good understanding of the calculation process. So let’s delve into the mechanics behind the Investment Score.

Components of the Investment Score

Your Investment Score is a reflection of your entire portfolio, comprising Mutual Funds, Stocks/ETFs, and smallcases. To get the most accurate score, be sure to import all your assets.

In a nutshell, your Investment Score boils down to two key elements:

• Balance: How your investments are divided among different categories of assets 
• Discipline: Your investment habits, including regular execution of SIPs and rebalances 

The Score Calculation Process

1. Categorising assets based on volatility

Your assets are divided into three categories based on their volatility Stable Assets, Steady Assets, and High Growth Assets. This ensures a balanced portfolio that aligns with the core satellite investment strategy.

For instance, ​the stable portion can consist of low-risk assets like short-term debt funds, asset allocation-based smallcases etc which provide stable returns. Steady assets can include medium volatile assets like large-cap focused mutual funds and smallcases which can provide higher returns than core assets, but are also more volatile than core assets. High-growth assets can consist of mid & small-cap focused mutual funds and smallcases, which have the potential to provide higher returns but are more volatile and risky than steady assets. High-volatility assets are only suitable for investors with higher risk tolerance and are not necessarily required for a balanced portfolio. Please refer to the Volatility Calculation Methodology to understand how volatility ratios are calculated and labels are defined for each asset. 

2. Deviation from ideal range

Having the right mix of assets in your portfolio is one of the key factors of having a healthy portfolio. For example, if your stable assets should ideally be 30-50% but are only 10%, your score may be impacted. The closer you are to the ideal balance, the higher your score.

3. SIPs (Systematic Investment Plans) 

Consistency is crucial for long-term investing success, and that’s where your SIP (Systematic Investment Plan) discipline comes into play. That’s why your SIP habits are factored into the score calculation. If you haven’t set up SIPs for your non-core Mutual Funds and smallcases or haven’t kept up with existing SIPs in the last few months, your score might take a dip. 

4. Rebalancing

Rebalancing is important for investing discipline as it ensures your smallcase stays aligned with the original strategy and adapts to market changes. However, we get that not everyone has smallcases in their portfolio, so if you have not invested in smallcases, rebalancing isn’t factored into your score. But, if you do have smallcases and happen to miss a rebalance update for over a month, your score might get impacted. Remember, rebalancing is entirely up to you, but you must stay updated about rebalances to have a healthy portfolio and a top Investment Score.

You can also refer to the Investment Score Report available on the investment score page on the smallcase app. The report is prepared by Windmill Capital – a SEBI registered research analyst and a wholly owned subsidiary of Smallcase. The report breaks down your score into individual components and helps you better understand your portfolio gaps and corrective measures.

We hope this guide has clarified how your investment score is calculated. We also hope that with this newfound knowledge, you are on an exciting journey towards building a strong, long-term portfolio. Happy investing!

Investment Score has been created and managed by Windmill Capital Private Limited (WCPL), a SEBI- registered Research Analyst having registration number – INH200007645. WCPL is also a wholly owned subsidiary of Smallcase Technologies Pvt Ltd.

This is a rule-based tool applicable uniformly to all the users of the tool and does not take into account any individual risk-reward preferences, demography, financial goals or any other financial assets/liabilities that an individual may have. This should not be construed as investment advice. You should seek professional advice when necessary, as the Company and WCPL do not assume responsibility for any outcomes. For detailed logic of the tool and disclosures related to WCPL, please refer to the investment score report available on the smallcase app